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  • Author: David Fielding, Kevin Lee, Kalvinder Shields
  • Publication Date: 03-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: In this paper we fit a VECM in output and prices to data from ten countries of the CFA Franc Zone. This model allows for various cross-country interactions in both the short run and the long run. The VECM parameters are used to estimate persistence profiles of different kinds, in order to identify the degree of homogeneity in the way in which the countries respond to macroeconomic shocks. In this way we can shed light on questions about the likely size of the costs incurred from these countries' membership of a monetary union.
  • Topic: Economics, International Organization, International Political Economy, International Trade and Finance
  • Political Geography: Africa
  • Author: Anja Shortland, David Stasavage
  • Publication Date: 02-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper examines to what extent the central bank for the West African Economic and Monetary Union (BCEAO) has used interest rate policy in response to domestic economic developments. We show that while in the long run the BCEAO matches changes in French (Eurozone) interest rates one for one, in the short run it retains freedom to react to domestic economic variables, such as inflation, the output gap, its foreign exchange position and government borrowing.
  • Topic: Economics, International Organization, International Political Economy, International Trade and Finance
  • Political Geography: Africa, France, West Africa
  • Author: Jean-Paul Azam
  • Publication Date: 02-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper brings out that poverty increased massively in the wake of the 1994 devaluation of the CFA franc, despite a significant recovery of economic growth. Although this increase affected all the social groups, it fell mostly on the urban poor. An analytical model is presented, which explains this puzzle by the stratification of the labour market, assuming that the formal sector workers are at the same time the investors in the informal sector. Then, capital intensity in the latter increases as the former anticipate the cut in formal sector wages that the long-awaited devaluation brings about. Ex post, they run down their assets for consumption-smoothing purposes, thus de-capitalizing the informal sector firms, with a negative impact on incomes in the (urban) informal sector.
  • Topic: Economics, International Organization, International Political Economy, International Trade and Finance
  • Political Geography: Africa
  • Author: David Fielding, Kalvinder Shields
  • Publication Date: 02-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: In this paper we use data from 17 African nations in order to investigate the hypothesis that monetary union – represented in this case by the CFA Franc Zone – augments the extent of macroeconomic integration. The paper covers a number of dimensions of integration including the volume of bilateral trade, real exchange rate volatility and the magnitude of cross-country business cycle correlation.
  • Topic: Economics, International Organization, International Political Economy, International Trade and Finance
  • Political Geography: Africa
  • Author: Anja Shortland, David Stasavage
  • Publication Date: 02-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper examines whether the BCEAO has made use of the various policy instruments at its disposal for steering credit in the individual CFA zone member countries to complement interest rate policy at the zone level. We estimate whether private sector credit has responded systematically to different monetary policy variables using iterated 3-stage least squares regressions for Burkina Faso, Côte d'Ivoire, Mali, Senegal and Togo. If we constrain the coefficient estimates there is some support for the hypothesis that the BCEAO has contracted private sector credit in response to a higher inflation differential with France. However, there seems to be no policy rule to restrict private sector credit in response to increasing government borrowing from the central bank or increased foreign borrowing. If the coefficient estimates are unconstrained, there does not appear to be any systematic policy to control credit expansion at the domestic level.
  • Topic: Economics, International Organization, International Political Economy, International Trade and Finance
  • Political Geography: Africa, France
  • Author: Mireille Linjouom
  • Publication Date: 02-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: The paper determines an analytical framework defining the choice of an optimal exchange rate regime for a typical CFA country. The policymakers behave strategically to decide to adopt alternative exchange rate regime by minimizing their loss function under specific constraints like economic characteristics and political consideration. One concludes a CFA economy with less inflationary propensity and greater external shocks volatility will tend to select a flexible exchange rate regime. Moreover, the model suggests that a CFA country with a more unstable political system and a higher propensity to apply inflationary policies will prefer a flexible arrangement than a fixed one.
  • Topic: Economics, International Organization, International Political Economy, International Trade and Finance
  • Political Geography: Africa
  • Author: Simeon Coleman
  • Publication Date: 02-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper investigates the impacts and responses of macroeconomic shocks in some domestic economies in Sub-Saharan Africa over the period 1961-99; more specifically, it seeks to answer the question of whether there are any systematic differences in the responses of the CFA franc zones and the non-CFA franc zone countries to macroeconomic shocks. Based on the Blanchard-Quah methodology, we identify shocks to the changes in real exchange rate and output using a structural VAR (SVAR) model for these small open economies. Our finding that the real exchange rate innovations in the CFA franc zones are largely independent of domestic variables suggests that external influence is more important in the CFA zones. There is also some evidence that money demand shocks are more significant in the non-CFA franc zone countries.
  • Topic: Economics, International Political Economy, International Trade and Finance
  • Political Geography: Africa
  • Author: W.F. Krugell, W.A. Naudé
  • Publication Date: 01-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: South Africa is characterized by significant inequality in spatial economic activity. Whether future growth and development on a subnational level in South Africa will be such as to reduce this inequality may depend on the economic growth and development of South Africa's largest cities. Our local economic growth empirics show some indications of conditional convergence in output between poorer towns as well as overall between all cities and towns. Between 1990 and 2000 some limited sigma convergence was found but this was driven by declines in the standard deviation of per capita income amongst the poorest quintile of towns. An estimate of conditional beta convergence of 1.2 percent over the period 1990-2000 confirms that overall convergence has been taking place. From an estimation of the determinants of economic growth on a local level, using a dataset on 353 local areas in South Africa between 1990-2000 we found the most significant determinants to be stocks of human capital and distance from harbours and markets. The effect of human capital on economic growth was strongly associated with the presence of large cities, as one would predict from endogenous growth theory.
  • Topic: Demographics, Development, Economics
  • Political Geography: Africa, South Africa
  • Author: Mattia Romani
  • Publication Date: 01-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: There is increasing evidence to suggest that a fundamental source of information for farmers on how to access and use new agricultural technologies comes from interacting with neighbours. Economic research on adoption of innovations in a rural context has only partially addressed the issue of how the social structure of a village can affect adoption and the final impact on productivity of farmers. This paper investigates the role of proximity interpreted not only in geographical terms but also along the line of ethnic similarities among neighbours (what we define as 'social proximity'). We use a panel dataset collected in Côte d'Ivoire to define the probability of accessing the knowledge network. The main results indicate that farmers from ethnic minorities are less likely to access, and benefit less from, extension services. But they seem to try to re-equalize their condition by putting more effort than dominant ethnic group neighbours in sharing information among themselves.
  • Topic: Agriculture, Demographics, Economics, Human Welfare
  • Political Geography: Africa
  • Author: Marcel Fafchamps, Christine Moser
  • Publication Date: 01-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper investigates the relationship between criminal activity and geographical isolation. Using data from Madagascar, we show that, after we control for population composition and risk factors, crime increases with distance from urban centers and, with few exceptions, decreases with population density. In Madagascar, crime and insecurity are associated with isolation, not urbanization. This relationship is not driven by placement of law enforcement personnel which is shown to track crime, but fails to reduce feelings of insecurity in the population. Other risk factors have effects similar to those discussed in the literature on developed countries. We find a positive association between crime and the presence of law enforcement personnel, probably due to reporting bias. Law enforcement personnel helps solve crime but appears unable to prevent it.
  • Topic: Crime, Demographics, Government
  • Political Geography: Africa, Madagascar